Tag Archives: USDA

If you grow CORN or TOMATOES and have crop insurance ! one final REMINDER! JUNE 10TH is the final planting date for corn and tomato crop insurance policies. If you have corn or tomato crop insurance policies be sure to get your crops in the ground before the June 10th deadline or you may be subjected to late planting production guarantee reductions!

JUNE 10TH is the final planting date for corn and tomato crop insurance policies. If you have corn or tomato crop insurance policies be sure to get your crops in the ground before the June 10th deadline or you may be subjected to late planting production guarantee reductions!

ATTENTION Growers with FRUIT crop insurance!!! If you have a blueberry, cranberry, peach or apple fruit crop insurance policy, acreage reports for that policy are due JANUARY 15! If you have any questions, please contact your crop insurance agent or our office at 856-769-0090 Happy Holidays!!!!

Not all that many years ago, crop insurance was only for the faint-hearted, or farmers whose farmland flooded or burned up without fail every year.

Few farmers signed up, in part, because it was expensive and there was rarely any return on their investment. Then Crop Revenue Coverage came along, with an attractive price and the improved opportunity to recoup one’s investment. Then USDA’s Risk Management Agency created new and improved crop insurance policies that ended up being guaranteed income and the majority of farmers were signing up. But now, with crop insurance being part of the family, and a routine decision that is widely endorsed by lenders, the Congress is considering imposing restrictions on its use to limit the type of farmers which have access to it. And there could be some unintended circumstances.

With the demise of direct payments as a part of the agricultural safety net, Congress is moving that responsibility to crop insurance. That is the only safety net in the proposal the House Ag Committee will be presenting. And in the Senate, crop insurance will be joined with a program call “ARC” that will ease the deductible by 6-8%. But crop insurance will be the workhorse in the 2012 Farm Bill as far as commodity programs are concerned.

But Congress has overhauled the administration of the program over the past few years, reducing its partnership with insurance carriers, while increasing the subsidy of premiums paid by farmers, as a means of attracting more to the program.

With a majority of farmers using the program to help manage their risk, and the program becoming more sustainable because of the larger pool of farmers paying premiums, the Congress is considering some major restrictions to limit farmer access and use of the program. Kansas State University ag economist Art Barnaby has outlined several of those restrictions.

One is a $40,000 maximum subsidy that farmers could receive on crop insurance. As outlined in the May 28th edition of Farmgateblog, once a farmer received $40,000 in benefits from subsidized premiums, he would have to pay the full premium, which could be the other 50-60% of the cost of the premium. That might be hit at the 50 acre mark for an operation with high value fruit or vegetable crops, or it might be the 1,700 acre mark for a dry land wheat farmer. Barnaby says it is a significant restriction with many unintended consequences for Congress.

Barnaby uses the same comment for another amendment being proposed in Congress for the 2012 Farm Bill, which would prohibit the ability to purchase crop insurance if your adjusted gross income (AGI) exceeded $750,000.

In his analysis, Barnaby says the $750,000 threshold will affect only a few farmers, but there was an effort in the House during the 2008 Farm Bill debate that would reduce it to $250,000. How close is your AGI to $250,000, and how would you manage risk without crop insurance if your AGI exceeded that threshold? Farm lobbyists know that no idea ever dies in Congress, although it may just be tabled temporarily, and ready to see the light at anytime.

Means tests used to be kept out of the Farm Bill, but the flood gates have been opening a bit wider each time the Farm Bill is re-written. This would be the first time restrictions were placed on crop insurance purchases or benefits. Barnaby says the $250,000 AGI limit will impact about the same number of farmers as the $40,000 premium subsidy limit. But the former will impact more corn farmers and the latter will impact more wheat farmers.

What is the acreage threshold if the limit is $750,000?

Michigan corn farmers would need about 4,564 acres or 6,968 acres of soybeans to hit the $750,000 AGI limit.

It would require about 13,437 acres of Kansas wheat and 16,499 acres of Oklahoma wheat to hit the $750,000 AGI limit.

It would require about 13,437 acres of Kansas wheat and 16,499 acres of Oklahoma wheat to hit the $750,000 AGI limit.

How do you get around this restriction, if it becomes law?
The most immediate concern is the $750,000 AGI limit

The Farm Service Agency applies the AGI to tax returns of individuals and corporations, so the corporation and individual stockholders must be under the threshold, or receive pro-rated benefits.

FSA now allows a husband and wife to act as separate owners, which would allow a couple to have a $1.5 million threshold, if a tax advisor would certify both would qualify if filing separately. If not, Barnaby says it might pay to divorce, but live together, so each has a $750,000 limit.

By shifting expenses and sales many farmers could keep under the limit

Chartering a C corporation that would receive farm payments, maintain crop insurance eligibility, and stay below the $750,000 threshold, but paying out rents and other payments to the farmer stockholders.

Increase the number of farms by adding family partners, but it may take legal help to achieve.

Barnaby says there are many unintended consequences of the Congressional proposals. Among them is the potential for the crop insurance program to fail for lack of sufficient premiums paid into the program. That would require a federal bail-out of a program it has been cutting. Secondly, many farmers may be unable to participate although required to do so by lenders.

Summary:
Proposals are being made in the Farm Bill debate on ways to limit participation or limit benefits to certain farmers based on financial thresholds. One would have farmers pay the full cost of the premium for crop insurance after a $40,000 subsidy on premiums. Another would prohibit crop insurance eligibility to farmers with adjusted gross income over $750,000, and possibly as low as $250,000.

The USDA’s projections of U.S. and world corn and feed grain supply and demand conditions presented in the May WASDEreport set the benchmark by which the corn market will judge unfolding events. Those events are continually unfolding, with some of the more important ones to be revealed this summer.
Among the factors to be revealed over the next few months, two of the most important are the rate of domestic feed and residual use and the prospective size of the 2012 U.S. crop. Feed and residual use of corn during the current marketing year is projected at 4.55 billion bushels. Use during the first half of the year, as implied by the quarterly stocks estimates, totaled 3.39 billion bushels. To reach the projection for the year, use during the last half of the year will need to total 1.16 billion bushels, about the same as consumed during the same period last year. Use in that period totaled 1.718 billion bushels in 2010 and 1.631 billion in 2009.
The projected decline in the pace of feed and residual use during the last half of the year is expected to come in the final quarter as a result of increased wheat feeding and the availability of more than the normal amount of new crop corn. Increased wheat feeding in the summer of 2011 was also expected, but did not occur. Based on the estimate of September 1, 2011 wheat stocks, feed and residual use of wheat during the summer of 2011 was at a 5-year low of 204 million bushels, 54 million less than use in the summer of 2010. Early corn planting this year is expected to result in an early harvest of a larger percentage of the 2012 crop and additional consumption of new crop corn in August. The pace of maturity of the crop will provide a gauge of the amount of corn likely to be harvested in August. The estimate of June 1 corn stocks, to be released on June 30, will provide for an estimate of feed and residual use during the third quarter of the marketing year and the level of use needed in the fourth quarter to reach the USDA projection.
A combination of large corn acreage and a projected record average yield of 166 bushels are expected to result in a U.S. corn harvest of 14.79 billion bushels this fall. That projection is 2.432 billion bushels larger than the 2011 crop and 1.698 billion larger than the previous record crop of 2009. The yield projection is 2 bushels above the trend calculation for 2012 based on the trend of the U.S. average yield from 1990 through 2010. The above-trend yield reflects the anticipated impact of a smaller than average portion of the crop planted after the optimum date for maximum yields. History suggests that a new record average yield will require below average summer temperatures and above average summer precipitation, such as occurred in 2004 and 2009. The USDA’s June 30 Acreagereport will provide estimates of planted and harvested acreage. On-going weather conditions and the USDA’s weekly report of crop conditions will provide the basis for yield projections prior to the USDA’s August Crop Production report.
Another factor that will unfold over the next few months is the prospective size of the corn and feed grain crops in the rest of the Northern Hemisphere. The USDA projects larger corn crops than those of last year in China, Canada, Mexico, and the Ukraine. Production of all feed grains is expected to be larger in the EU, Canada, China, and Mexico. The largest increases in production, however, are expected in the Southern Hemisphere as production rebounds in Argentina and South Africa. Those prospects will unfold in late 2012 and early 2013. The first USDA forecast for the 2012-13 marketing year is for record foreign feed grain production. The size of those crops will influence export demand for U.S. corn, with Chinese demand to be of special interest.
In addition to production prospects, the corn market will be influenced by the world economic and financial conditions as they impact consumer incomes and commodity demand. Domestically, the rate of implementation of 15 percent ethanol blends will also be important for corn demand as the blend wall for E10 approaches.
Conditions are in place for a very large U.S. corn harvest, a return to a more abundant stocks situation, and a return to lower prices. The magnitude of these changes is still to be determined and will unfold over an extended period. Even with higher average yields this year, substantially lower corn prices could have a disproportionately large impact on producer returns as anecdotal evidence suggests that a relatively small portion of the 2012 crop has been forward-priced at higher price levels